The impact of board subcommittees on firm performance: the moderating role of CEO duality according to the legal system

PurposeThe purpose of this study is to explore the moderating role of chief executive officer (CEO) duality in the relationship between board subcommittees and audit committees with financial expertise on firm performance in European countries. To extend this research, the sample is divided into two subsamples based on common and civil law, with the latter being divided into the three subgroups of civil French law, civil German law and civil Scandinavian law.Design/methodology/approachPanel data for 3,448 observations from nine European countries are analyzed for the period 2016-2019. The model is estimated and contrasted with the generalized method of moments.FindingsThe main findings of this study show that CEO duality moderates positively the relationship between corporate governance committees and firm performance in Europe. Furthermore, the results indicate that CEO duality moderates positively on the association between corporate governance committees and firm performance in countries located by civil law. The findings also evidence that CEO duality moderates positively on the association between corporate governance and compensation committees and firm performance in countries located by Civil-French. Finally, the findings reveal that CEO duality moderates positively the relationship between audit committees with financial experts and firm performance performance in countries located by Civil-German.Research limitations/implicationsThis study has some limitations. First, this study may not have considered some characteristics that could influence firm performance from other empirical and theoretical approaches. Second, this study divided the sample according to La Porta et al. (1997) and Graff's (2008) approaches, but other classifications from different studies may have led to different outcomes. Finally, this study did not examine the country-level aspects that influenced firm performance, such as culture and institutional characteristics beyond corporate governance, economic and political factors. This is a potential avenue for future research.Practical implicationsManagers can use the findings to make strategic company decisions, and they can help other directors understand the important effects CEO duality has on corporate boards because board subcommittees mitigate the negative effect of CEO duality on firm performance.Originality/valueThis study expands upon the research about the moderating role of CEO duality through the different board subcommittees, thereby presenting it as an instrument that greatly enhances firm performance. In this sense, this moderating role preserved firm performance when the agency theory was previously corroborated, and the independent management of CEO duality was found to negatively impact.